Market Segmentation: Basic Principles and Benefits
If you want to increase the efficiency of your business, market segmentation is the first thing you have to think about. In this article, you will learn about the 4 most common principles of market segmentation, as well as the benefits of the segmentation process.
Let's go directly to the definition of the term.
Market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as segments) based on some type of shared characteristics.
Market segmentation is becoming an essential part of a strong marketing strategy, plus it can be critical for companies in competitive market environments such as e-commerce. The main goal of market segmentation is to increase the sales and profits of the company.
Market segmentation helps you send the right brand messages every time, effectively targeting specific consumer groups. Segmentation is implemented due to certain principles. Let's consider each of them in more detail.
1. Geographical segmentation.
This type of segmentation involves the division of the market depending on location, it is a basic and useful principle of segmentation. A customer's location can help you better understand their needs and enable you to run location-based ads.
There are several types of geographic segmentation. The simplest is to identify users based on their location such as country, region, or city. You can also identify consumers based on the characteristics of the area they live in, such as climate, population density, and so on.
2. Psychographic segmentation.
Psychographic segmentation includes more mental and emotional characteristics. These attributes may not be as easy to observe as demographics, but they can provide valuable insight into your audience's motivations, preferences, and needs. Understanding these aspects of the audience will help you create content that your customers will love. Some examples of psychographic characteristics include personality traits, interests, beliefs, values, and lifestyle.
3. Demographic segmentation.
Demographic segmentation is one of the most common. The demographic type of segmentation includes the following characteristics: age, gender, marital status, profession, level of education, income, nationality and religion.
Demographic market segmentation is the simplest form of segmentation. Combining demographic segmentation with other types can help you narrow the market even further. One of the advantages of this kind of segmentation is that the information is relatively accessible and does not require large expenditures.
4. Behavioral segmentation.
You can also segment your market based on consumer behavior. Dividing your audience based on the behavior they display allows you to create brand messages that match those behaviors. You can pay attention to your customers' shopping habits and actions taken on a website, or observe their loyalty to your brand. Based on this, you can create segments of your customers.
These four principles of segmentation are considered fundamental in the marketplace, but there are many other strategies that you can use in your business, including many variations of these basic principles.
Benefits of market segmentation.
Segmentation undoubtedly has great importance for profit growth and business development. Companies that properly segment their market receive the following benefits:
1. Development of effective marketing strategies. Identification of customer needs gives a clear understanding of which solutions will have the greatest success.
2. Attracting target customers. Market segmentation helps you create targeted, direct messages that engage your audience.
3. Increasing brand loyalty. Customers are always keen to feel understood, well served and trusted, and are more likely to stay long term with a brand that has good interactions.
4. The ability to stand out from the competition. You no longer need to strive to generalize everything for fear of not covering certain categories of customers - you can directly address a certain group of people, because you know everything about them, their desires and needs. More accurate brand messages make your company stand out.
5. Product improvement or new development. You can add new features and functions to your product based on the needs of your customers and develop various new products that will meet the needs of your audience.
Market segmentation may seem like a no-brainer, and for many companies, it really is. But do not assume that someone is immune from mistakes.
If segmentation is done without prior analysis, businesses risk getting poor results. Segmentation can interfere with the company's activities if the company's audience is not fully explored or need new revision.
Fortunately, companies now have a wealth of information to help define their segments. The main thing is to use this information correctly in order to attract as many customers as possible.